Regulatory Considerations

Question 1

ERISA

Answer 1

Protects the interest of plan participants.

Imposes duties, standards, and prohibitions on plan fiduciaries, prohibited transactions and exemptions.

Fiduciary: one who renders investment advice for a fee or other compensation direct or indirect with respect to money or other property of such plan or has authority or responsibility to do so.

Question 2

DOL

Answer 2

Defines Investment advice as:

-The value of or advisability of, investing in, or purchasing, or selling of securities or other property

-Whether the advisor, either directly or indirectly (alone or together with an affiliate) does either of the following
+ Has discretionary authority or control whether or not pursuant to an agreement, arrangement, or understanding, with respect to purchasing or selling securities of property for the plan
+ Regularly renders advice to the plan based on mutual agreement…written or otherwise, in which advise will serve as the primary basis for investment decisions with respect to the plan based on particular needs of the plan regarding such matters..policy strategy, overall portfolio compositions, diversification.

research or recommendations itself is not advice unless done pursuant to a mutual agreement

issue advisory oppinions

Question 3

Fiduciary Liability Issues

Answer 3

fiduciary must act:

• solely in the interest of the plan participants and beneficiaries.
• for the exclusive purpose of providing benefits to participants and benes reasonable expenses
• care skill and prudence and diligence (prudent man rule)
• Diversifying Investments to minimize risk and losses.

Question 4

Prohibited Transactions

Answer 4

Can’t deal with assets of the plan in fiduciaries own interest or for own account.

Anti kickback rule- can’t receive consideration for its own personal account from any party dealing with the plan in connection with a transaction involving plan assets

Question 5

PBGC

Answer 5

control the operation of qualified plans

Benefits guaranteed DB and Cash Balance
guarantees monthly benefit
no lump sum
adjusted annually
only nonforfeitable benefits

Question 6

Treasury Department

Answer 6

Interprets and administers the tax laws.
revenue procedures final
revenue rulings proposed
private letter rulings temporary

Question 7

DB Terminations

Answer 7

voluntary by employer
involuntary by PBGC only
-plan isn't funded to legal standards
-plan can't meet benefit payments
-long run loss that will only get worse
Distress termination:
-bankruptcy liquidation
-bankruptcy reorg
-can prove to PBGC necessary to pay debts